New payment systems heighten fraud concerns at banks

Banks are concerned about new fraud risks

Banks are concerned about new fraud risks brought on by new technology as they struggle with the financial crisis.

New types of payment methods, including mobile banking, pre-paid cards, and "virtual world" transactions, are causing concern at banks, according to a survey of senior bank anti-money laundering (AML) compliance officers in North America and Europe.

The survey of 30 compliance officers, undertaken by risk and compliance specialist Fortent, confirmed that identity theft "presented the greatest emerging threat" to their institutions in the area of financial crime.

"The expansion of payment platforms, although good for business, poses new risks on both the regulatory and security fronts," said Ed Baum, Fortent chief marketing officer.

"Our survey reveals that financial institutions are acutely aware that they must respond to these emerging threats."

The survey found the greatest threat to banks were:

Identity theft - cited most often by respondents (52%) as the greatest emerging financial crime threat

"Virtual world" (such as Second Life) payment systems (44%)

Electronic cheque systems (40%)

Employee fraud (32%)

Stored value cards (28%)

When respondents were asked in which areas they expected to see greater regulatory interest over the next five years, 78% cited new payment products, including payment cards, mobile payments, and "virtual world" transactions.

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